Oil Refinery

Permit Extension Staves Off Misery For First U.S. Refinery In Three Decades

The Colorado River Valley

From the state’s northern edge to its southern boundaries, growth flows along the Colorado River

Permit extension staves off misery for first U.S. refinery in three decades

By Peter O’Dowd

Plans for an oil refinery outside of Yuma, the first this country has endorsed in 30 years, dodged disaster earlier this summer when the Arizona Department of Environmental Quality extended a draft renewal of its elusive air-quality permit.

colorado_riverTo understand the bureaucratic, political and legal hurdles developer Arizona Clean Fuels had to clear to get this far, consider the initial permit, which was issued last year and first sought in the late 1990s. Under Arizona law, ACF had 18 months from the date of issue to begin construction on its 1,450-acre site. Without honoring that stipulation, the permit would expire, leaving the developer at the bottom of another uphill struggle.

“Losing that air permit, it’s simply something our project did not want to see happen,” says Ian Caulkins, an ACF spokesman. “That’s an understatement. Getting that permit is the holy grail of building a refinery.”

Earlier this year, ACF notified the state it would be unable to move by the fall 2006 deadline, but ADEQ ultimately promised a permit renewal exactly the same as the one issued a year earlier.

The renewal lifted mounting pressure off the developer, who encountered significant delays securing a crude oil source and finding financial backing from investors less than eager to fund a project that might not provide a return for years. “We had anticipated at this stage in the game that we would be moving forward with (an oil) contract with Mexico, and that is just not the case today,” Caulkins says. Instead, ACF is confident their oil coffers will bubble over with a Canadian supply mined from sand reserves.

Ultimately, it makes no difference from where the oil originates. Every gallon will be shipped to Mexico’s Baja Peninsula where it will begin a 250-mile journey through a pipeline built specifically for the project. The pipeline provided the necessary link to an ocean port, but securing it didn’t come easily. “We have had significant discussion with the Mexican government,” Caulkins adds. “Normally, they would not allow non-Mexican crude oil to be pumped through the pipeline so this was a big decision.” ACF CEO Glenn McGinnis called the deal a “landmark” agreement, one that took four years of negotiations and permitting. Mexico’s reimbursement details are still undetermined, Caulkins says.

With one challenge conquered, the next remains securing the nearly $3 billion needed to get the refinery pumping. Both McGinnis and Caulkins say ACF has investors in place but neither would risk the terms of confidentially agreements protecting their identities. “We are dealing with several large groups, some domestic, some international,” McGinnis says. “It takes more than one to put together the financing for a project of this magnitude. It has been a struggle convincing investors.”

Almost all of the refinery’s daily output of motor fuel—approximately 150,000 barrels—would find its way to Phoenix gas pumps. Caulkins says most Valley residents won’t notice any change, citing a seamless benefit instead: more supply means fewer catastrophic price jumps in case of an inevitable glitch in the system.

And amid ongoing discussion of reducing the global carbon footprint, ACF officials say they embrace alternative fuel research. But now is not the time to abandon refineries, Caulkins explains. “We recognize there is a certain amount of reality, and the reality is that we have a long way to go before mainstreaming alternative fuels. In the meantime, we can’t give up on building new refineries. We need additional sources today. We told environmental groups they should embrace our project as the cleanest oil refinery in North America.”

San Luis
With Port Stressed, Help is on the Way

San Luis, Ariz.—Greater Yuma Port Authority officials are trying to build a commercial port of entry five miles east of the present one in San Luis. Once completed, today’s commercial port, which has no room to expand, would be closed and converted into a pedestrian, noncommercial crossing by 2009. “Once the commercial is pulled out, the present port will be reconstructed and it goes from a six-lane to a 12-lane crossing point and allows the government to rebuild downtown San Luis,” says Jim Chessum, a GYPA administrator. Business would be more likely to emerge in San Luis with the modified port, he adds. One local official said he “couldn’t even fathom” the benefit to the state’s economy spurred by the increased ease of entry.


Tale of Two Cities: Old Yuma, New Yuma

Yuma, Ariz.—Yuma’s growth statistics read like a laundry list of blue-ribbon accolades: No. 1 in manufacturing employment growth, Inc. magazine’s No. 1 selection of America’s “hottest small cities,” one of Forbes’ “top 10 “steroid cities,” fourth in the nation for overall job growth. What was once a dusty stopover on the way to San Diego has 10 new industrial plants, a 1.1 million-square-foot Westcor mall on Interstate 8, another mall in the midst of renovation and plans for its first five star hotel. “Yuma is an untapped recreational resource,” says Chris Camacho, president and CEO of the Greater Yuma Economic Development Corp. “We’ve seen the trend shifting,” he adds. “Rather than driving RVs down, snowbirds are buying second homes.

Bullhead City
Growth Sparks Bullhead Housing Fete

Bullhead City, Ariz.—Bullhead City is in the midst of a boom as swift as the river it was built along. Dick Adams, president and CEO of the Bullhead Regional Economic Development Authority, says the growth has created unlikely issues. “We are for the most part 100 percent employed. We’re at a 4.6 percent unemployment rate but when you get that low, you are in an area of unemployable or into a group that doesn’t want to work.” Adams says the city has 13,600 lots in subdivisions waiting to be built upon while 3,300 of those lots are already permitted and ready for construction. The Laughlin Ranch master-planned community will support 44,000 homes on 10,000 acres. Adams says the first of four golf courses is already complete. “Our demographics are improving on a daily basis,” he adds. “People from Southern California are bringing in their big money.” Five million people visit Bullhead every year, Adams says. By the next census he expects a population in excess of 50,000.


AZ Business MagazineLake Havasu
City on the Lake Awash with Marine Employment

Lake Havasu City, Ariz.—Lake Havasu City has built a marine industrypowerhouse on the cusp of its watery namesake. A March 2006 study conducted on behalf of the Lake Havasu City Marine Association reveals the importance of boat manufacturing, sales and maintenance on the local economy. “This marinestudy reveals the largest concentration of marine manufactures of high-end boats in the United States,” says Gary Kellogg, president and CEO of the Lake Havasu City Partnership for Economic Development. In fact, research concludes the concentration of existing marine industry here far exceeds standards typically needed to form specialized economies, such as software in Silicon Valley or entertainment in Las Vegas. According to the study, the local marine industry has soundly outperformed the Lake Havasu City economy over the past five years, wages are almost 17 percent higher than the average and the economic output totaled $191 million.




Arizona Business Magazine Aug/Sept 2006

AZ Business Magazine Aug-Sept 2006 | Previous: The Border Report